Chelsea is just 2 points ahead, which means if Chelsea wins, the gap would be 5 points, if City wins then Chelsea would get behind one point and would lose the position as well. Plus, we are talking about City losing to PSG, but what about Chelsea having just 1 win out of last 5 games in the premier league? That is important too and shows that they are not doing great, Man city has 3 wins and no losses in the last 5 games, so the momentum is on their side instead.
The match between Chelsea and Manchester City is important for both, because they need to win it, to create advantage against their direct competitor for top four, but also to make sure that they won't fall behind other competitors in this race too.
A draw is kind of acceptable for Chelsea because they are leading Manchester City with 2 points, but it is not best result they want. A draw can cost Chelsea a fourth position if Newcastle United have a big win this week to have same total points and better goal difference. It's small chance for Newcastle United to get a fourth position from Chelsea after this week but they are creating pressure on Chelsea definitely.
Manchester City certainly want to win this match after a shock in Champions League, they want a win to heal their pain and to get a fourth position from Chelsea too. Both Chelsea and Manchester City had not too good forms recent weeks and it's really hard to predict what team will play better in this big match.